Test 2

Front 1

Application controls

Back 1

Controls that apply to the processing of specific computer applications and are part of the computer programs used in the accounting system.

Front 2

Computer-assisted audit techniques (CAATs)

Back 2

Computer programs that allow auditors to test computer files and databases.

Front 3

Control Activities

Back 3

The policies and procedures that help ensure that management's directives are carried out.

Front 4

Control deficiency (Ch. 6 definition)

Back 4

A deficiency in internal control exists when the design or operation of control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis.

Front 5

Control environment

Back 5

The tone of an organization, which reflects the overall attitude, awareness, and actions of the board of directors, management, and owners influencing the control consciousness of its people.

Front 6

Control Risk

Back 6

The risk that material misstatements that could occur will not be prevented, or detected and corrected, by internal controls.

Front 7

Electronic (Internet) commerce

Back 7

Business transactions between individuals and organizations that occur without paper documents, using computers and telecommunications networks.

Front 8

Electronic data interchange

Back 8

The transmission of business transactions over telecommunications networks.

Front 9

General Controls

Back 9

Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operations.

Front 10

Internal control

Back 10

The method by which an entity's board of directors, management, and other personnel provide reasonable assurance about the achievement of objectives in the following categories: (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance with applicable laws and regulations.

Front 11

Material weakness

Back 11

A deficiency, or combination of deficiencies, in internal control and ICFR, such that there is a reasonable possibility that a material misstatement of the entity's annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.

Front 12

Monitoring of Controls

Back 12

A process that assesses the quality of internal control performance over time.

Front 13

Reliance Strategy

Back 13

The auditor's decision to rely on the entity's controls, test those controls, and reduce the direct tests of the financial statement accounts.

Front 14

Significant Deficiency

Back 14

A deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance.

Front 15

Substantive Strategy

Back 15

The auditor's decision not to rely on the entity's controls and to audit the related financial statement accounts by relying more on substantive procedures.

Front 16

Walkthrough

Back 16

A transaction being traced by an auditor from origination through the entity's information system until it is reflected in the entity's financial reports. It encompasses the entire process of initiating, authorizing, recording, processing, and reporting individual transactions and controls for each of the significant processes identified.

Front 17

Control deficiency (Ch. 7 definition)

Back 17

A weakness in the design or operation of a control such that management or employees, in the normal course or performing their assigned functions, fail to prevent or detect misstatements on a timely basis.

Front 18

Entity-level controls

Back 18

Controls that have a pervasive effect on the entity's system of internal control such as controls related to the control environment; controls over management override; the entity's risk assessment process; centralized processing and controls, including shared service environments; controls to monitor results of operations; controls to monitor other controls; including activities of the internal audit function, the audit committee, and self-assessment programs; controls over the period-end financial reporting process; and policies that address significant business control and risk management practices.

Front 19

Internal control over financial reporting

Back 19

A process designed by, or under the supervision of, the entity's principal executive and principal financial officers, or persons performing similar functions, and effected by the entity's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Front 20

Relevant Assertion

Back 20

A financial statement assertion that has a reasonable possibility of containing a misstatement or misstatements that would cause the financial statements to be materially misstated.

Front 21

Remediation

Back 21

The process of correcting a material weakness as part of management's assessment of the effectiveness of ICFR.

Front 22

Safeguarding of assets

Back 22

Those policies and procedures that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity's assets that could have a material effect on the financial statements.

Front 23

Significant account or disclosure

Back 23

This is significant if there is a reasonable possibility that the account or disclosure could contain a misstatement that, individually or when aggregated with others, has a material effect on the financial statements, considering the risks of both overstatement and understatement.

Front 24

Significant deficiency

Back 24

A deficiency, or a combination of deficiencies, in ICFR that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the entity's financial reporting.

Front 25

Analytical Procedures

Back 25

Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data.

Front 26

Assertions

Back 26

Expressed or implied representations by management that are reflected in the financial statement components.

Front 27

Exception

Back 27

A response that indicates a difference between information requested to be confirmed, or contained in the entity's records, and information provided by the confirming party.

Front 28

General Controls

Back 28

Controls that relate to the overall information processing environment and have a pervasive effect on the entity's computer operation.

Front 29

Lapping

Back 29

The process of covering a cash shortage by applying cash from one customer's accounts receivable against another customer's accounts receivable.

Front 30

Negative confirmation request

Back 30

A request that the confirming party respond directly to the auditor only if the confirming party disagrees with the information provided in the request.

Front 31

Nonresponse

Back 31

A failure of the confirming party to respond, or fully respond, to a positive confirmation request or a confirmation request returned undelivered.

Front 32

Positive confirmation request

Back 32

A request that the confirming party respond directly to the auditor by providing the requested information or indicating whether the confirming party agrees or disagrees with the information in the request.

Front 33

Substantive tests of controls

Back 33

Tests to detect errors or fraud in individual transactions.

Front 34

Tests of controls

Back 34

Audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level.

Front 35

Tests of details of account balances and disclosures

Back 35

Tests that concentrate on the details of amounts contained in an account balance and in disclosures and related footnotes

Front 36

Blank or zero-balance (positive) confirmation

Back 36

A confirmation request on which the recipient fills in the amount or furnishes the information requested.